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[White Paper] Europe’s Window of Opportunity for Terminal Operators

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As Europe is going through an unprecedented financial and economic crisis,
the oil and gas industry continues to face an uncertain business environment.
Another recession could lead to reduced demand and further increase the
pressure on margins in downstream operations. This has suppliers and buyers
looking to exploit any operational efficiency they can.
Terminal operators play a critical role in helping suppliers and buyers achieve
those efficiencies, and can benefit their own operations while doing so. To gain
a competitive edge, terminal operators need to be mindful of the big trends
in the industry and make sure that their Terminal Automation System (TAS)
is capable of supporting state-of-the-art supply management systems that
suppliers intend to use in order to maximize their efficiency. And for most TAS,
a simple configuration change is all it takes to achieve this.

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[White Paper] Europe’s Window of Opportunity for Terminal Operators

  1. 1. Europe’s Window of Opportunityfor Terminal OperatorsDownstream industry trends bring new real-time supplymanagement systems to the European marketDecember 2012 / White PaperMake the most of your energy SM
  2. 2. SummaryIntroduction ............................................................................................... p 1Industry changes usher in new norms........................................................ p 3 .Window of opportunity............................................................................... p 4Integration with a simple, yet cutting-edge TAS configuration ..................... p 6Multi-Nationals are driving the trend towards real-time supplymanagement in Europe ............................................................................. p 7Conclusion ................................................................................................ p 8
  3. 3. Europe’s Window of Opportunity for Terminal OperatorsIntroductionby Scott Fleck*, Chief Strategy and Technology Officer at Schneider ElectricAs Europe is going through an unprecedented financial and economic crisis, Downstream industry trends are bringing new real-time supplythe oil and gas industry continues to face an uncertain business environment. management systems to theAnother recession could lead to reduced demand and further increase the European market. Early adoption bypressure on margins in downstream operations. This has suppliers and buyers terminal operators puts them on thelooking to exploit any operational efficiency they can. leading edge and offers the chance to attract the business of majorTerminal operators play a critical role in helping suppliers and buyers achieve suppliers and buyers.those efficiencies, and can benefit their own operations while doing so. To gaina competitive edge, terminal operators need to be mindful of the big trendsin the industry and make sure that their Terminal Automation System (TAS)is capable of supporting state-of-the-art supply management systems thatsuppliers intend to use in order to maximize their efficiency. And for most TAS,a simple configuration change is all it takes to achieve this.* Article published in the March 2012 edition of Tank Storage White paper | 01
  4. 4. Industry changes usherin new norms
  5. 5. Europe’s Window of Opportunity for Terminal OperatorsIndustry changes usherin new normsTrends across all industries indicate that in orderto be successful in today’s markets, companiesneed real-time access to the critical informationthat affect their operations. For the downstreamoil and gas industry, the need for rapidly deliveredinformation has increased due to the complexityand higher pace of energy trading, higher cost ofcapital for fuel in tanks, and also because of recentshifts in the ownership structure of terminals. In the United States, suppliers have been able to overcome these challenges by partnering withOver the past few years, large oil companies in the terminal operators to implement integrated supplyUnited States and Europe have been reevaluating management systems that plug in to the operators’their portfolios and divesting non-core industrial TAS. These services have evolved over time toassets. While in Europe non-proprietary terminals meet the changing needs of the industry – from thehave been the norm for quite some time, in the first systems developed in the 1980’s that issuedUnited States major suppliers have increasingly sold electronic Bills of Lading (BOL) at the rack, tooff proprietary terminals in favor of utilizing outside today’s solutions which include allocation andsupply points (OSPs) in order to secure savings in credit control features and instantly transmit BOLsoperational and overhead costs. to the necessary parties.Unfortunately, distribution from OSPs also creates Before the development of these solutions, it wouldthe vast logistical challenge of coordinating have been an impractical decision to developfuel supply at hundreds of individually operated a network of third party terminals for productterminals, creating significant difficulties in tracking distribution, despite any cost savings from divestingproduct allocations and providing accurate, in distribution infrastructure. Now, suppliers aretimely billing. able to take full advantage of the cost-effectiveness of distributing from OSPs while maintaining the billing and supply management efficiencies of a proprietary distribution network. White paper | 03
  6. 6. Europe’s Window of Opportunity for Terminal OperatorsWindow of opportunityfor terminalsFor terminal operators, recognizing these trendsand embracing the technology offers an openwindow of opportunity. By configuring their TAS tointerface with suppliers’ fuel supply managementsystems, terminal operators can help theirsuppliers implement a simple solution to betterstreamline business processes and overcomemarket challenges. In doing so, they becomepreferred partners to the most advanced suppliersin the industry by offering them the ability toconsolidate fuel supply management and to takeadvantage of the most efficient billing procedures. This trend is particularly relevant for Europe, where many different systems are used to moveBenefits of BOLs between parties, leading to the loss of valuable time and accuracy when BOLs haveStandardization to be translated from one format to another. AnOne of the biggest issues suppliers and their increased adoption of real-time BOLs wouldcustomers face is the widely differing formats establish a single consistent framework forand speeds with which BOLs may be generated communication and establish an open industry-and processed across a network of OSPs. While standard format. Updates to the PIDX standardsthey can be captured electronically from third are currently being finalized to account forparty terminals, formats do not always follow an European data needs and existing country-industry-standard and often vary dramatically by-country standards to provide one commonacross communication platforms. These solution for the whole Europeaninefficiencies can cause cash-flow issues, high downstream industry.labor costs of handling exceptions, and delayedsupply and billing information. PIDX, originally part of the American Petroleum Institute (API), has been an established standardsSupply management solutions offer BOL data body for over 25 years. PIDX is now anwithin seconds of load completion via the independent international standards organizationterminal’s TAS system, allowing for timely and supported by the membership of companies fromaccurate billing that is beneficial to both the the industry such as BP, Chevron, ConocoPhillips,supplier and the buyer. These systems also and Shell as well as industry vendors. Workgroupsprovide master data management features are established that utilize volunteer efforts to workthat allow direct integration to the supplier’s cooperatively on the common needs of all partiesERP system to streamline setup and change involved. The European Downstream Workgroup,management. In addition, they provide BOL established 18 months ago, has been focused onstandardization across the terminal network these initiatives with efforts from companies suchthrough the use of Petroleum Industry Data as Shell, BP, Schneider Electric, and others,Exchange (PIDX) protocols. Terminals that but participation in PIDX is open to allcan accommodate these solutions offer a industry members.clear advantage to suppliers, and with a PIDXcompatible TAS they can support nearly all fuelsupply management systems, regardlessof vendor. White paper | 04
  7. 7. Europe’s Window of Opportunity for Terminal OperatorsWindow of opportunityfor terminalsEffective supply affects their own supply levels and decisions about trucking logistics. If supplies are tight, if a buyermanagement for has maxed out his product allocations withoutsuppliers knowing it, or even if some outside disturbance is disrupting supply at a terminal, trucks may be sentDisruptions in product supply hurt the bottom there only to be denied loading privileges, a costlyline no matter where one falls in the downstream trip that must then be repeated at another terminalindustry. At the intersection of a multitude of where product can be lifted.suppliers and buyers with complex and oftenwidely differing ways of doing business, a terminal When suppliers partner with terminal operatorsis a critical piece of the supply network. If suppliers to use fuel supply management systems, theyhave difficulty forecasting demand, accurately can provide customers with the ability to seetracking supply levels and altering allocation and when supply is tight or when their allocations arecredit limits at a terminal, they will be ineffective in approaching limits via online tools. Suppliers aremanaging customer demand and terminals may able to communicate with buyers and keep themfind themselves with tight or depleted fuel stores. accurately informed about which products areThese inefficiencies at the terminal cut into the available for them, at which terminal, at any givenmargins of all parties involved. time. By checking their status at a terminal before sending trucks, buyers avoid unnecessary failedThe broad-based adoption by suppliers and loads and protect their margins in aterminals in the U.S. of supply management volatile market.solutions has largely mitigated these issues.Systems, such as Schneider Electric’s TABS, The tools and abilities offered by fuel supplyone of the most widely installed solutions, offer management systems trickle throughout thereal-time insights into rack demand to help industry and help foster beneficial relationshipssuppliers proactively manage supply for contract between all nodes. The efficiencies providedcommitments, measure traffic at exchange to suppliers improve the quality of service theyterminals and ensure that each buyer receives are able to deliver to their buyers, which in turnhis allocated nomination. Credit and volume solidifies continued business for the supplier. Ascontrol systems automatically authorize or alert a a key element in the business cycle, terminalcustomer who may otherwise accidentally exceed operators are an essential partner in implementingtheir limits, which reduces the risk of credit losses these new trends and receive their own benefit asand inventory runs, as well as ensures that each the preferred location to do business.party receives their fair volumes. Conversely, terminals that do not keep up leaveTerminals central the suppliers with difficult decisions aboutto relationship whether they want to continue doing business “the old way.” In the United States, the answerbetween suppliers has been a resounding “no,” with nearly every terminal integrating their TAS with suppliers’ fueland buyers management systems.Buyers are just as concerned about terminal fuelsupply management as suppliers, as it greatly White paper | 05
  8. 8. Europe’s Window of Opportunity for Terminal OperatorsIntegration with a simple, yetcutting-edge TAS configurationFortunately, most terminal operators do not needto invest any capital to integrate with a supplymanagement system – they can benefit from all ofits advantages simply by allowing their TAS to beconfigured to interface with the supplier’s systemeither via the web or via another secure connection.Once completed, the TAS is ready to integrate withthat specific supplier’s supply management system,in addition to most other available systems, as theyare relatively compatible with the majority of TAS.As an example, DTN TABS is not only compatiblewith Schneider Electric’s Guardian3 terminalautomation service, but with any TAS that is PIDXcompatible with a few mouse-clicks. In addition,Schneider Electric places a premium on creatingindustry compatibility and works with terminaloperators and TAS vendors to accommodate non-PIDX standards, transparently converting to PIDXstandards allowing all other parties involved to onlyhave one protocol and interface to support. White paper | 06
  9. 9. Europe’s Window of Opportunity for Terminal OperatorsMulti-Nationals are driving the trend towardsreal-time supply management in EuropeWhile the picture in Europe is slightly differentcompared to the United States, it faces manyof the same challenges suppliers and terminalshave been working to overcome in America.Infrastructure and standards vary from countryto country. Certain countries operate primarilyon pre-order purchases, others primarily on rackpurchases. The protocols for issuing BOLs andsupply management differ from one country to thenext and a majority of terminals are not equippedto provide real-time information.Suppliers are aware of these challenges and dueto the successful implementations in the UnitedStates, real-time information systems and theirmany advantages are primed to become the newstandard for doing business in Europe. In additionto all the benefits provided by being able to reactto changes quickly and in real-time, deployingthese systems will provide an opportunityto standardize the industry and establish anormalized format for BOLs. White paper | 07
  10. 10. Europe’s Window of Opportunity for Terminal OperatorsConclusionA primary service provider to suppliers in the United States, Schneider Electrichas observed the emergence of this trend, as the multi-national companiescurrently utilizing DTN TABS have begun expressing interest in also being ableto use this service for their operations in Europe and the rest of the world.However, even though large multi-national players are leading the charge,supply management solutions benefit suppliers of all sizes and will eventuallybecome the new industry standard – over 95 percent of US terminalscurrently integrate with supply management solutions provided bySchneider Electric and other integrated supply management solutions.While market pressures will eventually necessitate the integration ofautomation systems with suppliers’ fuel supply management systems,terminal operators that support the implementation of these services canenter at the ground level and capitalize on adopting solutions that suppliersincreasingly require but few European terminals currently offer. White paper | 08
  11. 11. ©2012 Schneider Electric. All rights reserved.Schneider Electric USA, Inc. 9110 West Dodge Road Omaha NE 68114 Tel: 800-610-0777 Fax: 402-255-8125 www.schneider-electric.com/us December 2012

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